Ethics and the Global Supply Chain - Literature review Example

Name : xxxxxxxxxxx Institution : xxxxxxxxxxx Course : xxxxxxxxxxx Title : Ethics and the Global Supply Chain Tutor : xxxxxxxxxxx @2013 Introduction In many contexts of the business world, financial benefit tends to come above other values, including those of ethical behavior and social responsibility. This is often as a result of the corporations struggle to cut costs while also reducing financial uncertainty. The drive for cost control and certainty is most visible in global corporate supply chains, but financial success and ethics in supply chains are mutually inclusive in a business operation (Branch 2008). Large corporations find it hard to convince the public that their environmental and social credentials are genuine, and even when they have good intentions the size of supplier networks in major corporations is often too large, making it difficult for them to attain effective, transparent and quick improvements (Flynn et al. 2011). Although it is a difficult task, ensuring an ethical supply chain is possible through proper auditing, as it happens at Wal-Mart Stores. This paper discusses the creation of ethical global supply chains with reference to the case of Wal-Mart. Even with great technological advances in the world today, global supply chains are still based on interaction between people. Wherever there is an interaction between people, there has to be the emergence of ethical issues (Branch 2008). According to Skjott-Larsen & Schary (2007), the international marketplace requires supply chains to be swift and well spread. Their extensive distribution has therefore increased their meaning to not only functionality in transport and manufacturing, but also a transformative feature in how they remake the organizations and the kind of impact that they leave on communities. Efficiency in a supply chain requires that it should be responsive to dynamic priorities through controlling costs, maintaining timely schedules and most significantly, offering the companies some allowance to grow. Setting out to achieve a seamless corporate citizenship across the world is easier said than done. This is because the practice of outsourcing has for instance given rise to many new challenges. It has brought up different standards in relation to safety, health and environmental sensitivity. Corporations which were in the past considered to be good at Corporate Social Responsibility have therefore found it hard to remain so while in their manufacturing operations abroad, even as proponents of CSR demand that companies should practice a lot of ethical responsibility beyond political and geographic borders and across cultural traditions (Brammer et al. 2011). An effective supply chain ethics policy is not all about marketing, appearances and sales. Brammer et al. (2011) explain that rather, it is one which gets its credibility from placing its supply chain practices and policies at its center. Ensuring this will lead to enjoyment of several benefits, ranging from reduction in waste and material costs to an increase in efficiency and ability to be considered for incentive programmes by the government. However, this is where most corporations fail, because of a disconnection between what they intend to do and what they actually do. It is often easy to change a firm’s marketing and branding, thereby presenting one’s company as one which is ethically and environmentally and ethically aware. However, it is difficult to reconfigure or recreate a whole global supply chain. Walmart is a good example of a company that has pursued an ethical global supply chain process, and managed to make it a major component of its competitive strategy. According to Wisner & Leong (2011), the company is currently the largest retailer worldwide and has experienced growing profitability throughout. Its core goal is been to help people to have better lives, and this relates to not only the company’s associates and customers, but also employees. The company has collaborated with governmental, non-governmental bodies and other business entities to ensure that there is verification of its output to ensure that production processes ensure respect and dignity for employees in the entire supply chain. The company does not allow any unauthorized subcontracting. Relationships with factories that engage in unauthorized subcontracting are classified as failed in the corporate system and can be permanently barred from selling merchandise to it in all retail markets. Wal-mart’s suppliers are required to be having a company representative and not simply an agent stationed in every country within which the supplier actively sources the merchandise for Wal-Mart. Company representatives are responsible for maintenance of compliance with the ethical standards for sourcing. Factory audits have become a central feature in the company’s ethical sourcing efforts. The factories that produce for the company have external owners, and because of this there are regular audits conducted so as to verify that all suppliers are compliant with the standards set for them, so that labor practices and working conditions are of high quality in factories. The audits check whether workers treatment in the facilities is respectful and dignified. They also check whether working hours are in line with Wal-Mart and legal standards, and that the workers are properly paid, complete with benefits that are bound by contract. They further ensure adherence to safety and cleanliness standards, in addition to the presence of safe and open communication between management and employees (Roberts & Berg 2012). In trying to ensure improve facility conditions in relation to fire risk worldwide, the company has modified its auditing and assessment protocols. Facilities that violate fire-related regulations are given 30 days to change, or else production is barred (Wisner & Leong 2011). Suppliers that work with Wal-Mart Global Sourcing have to be vetted. In order to be accepted, a factory has to score one of the company’s two highest ratings after assessment, as long as they produce a component or a part of any product as long as it carries the Wal-Mart private label. Upon approval to be part of its supply chain, audits that are afterwards conducted are unannounced (Roberts & Berg 2012). Factory audits involve an opening meeting where there is verification of business licences and follow-up on steps taken to deal with previous violations. There is then a factory tour to check on safety, health, environmental and equipment compliance. Employee interviews are afterwards conducted and personnel documents checked for terms of work and age of employees. After this there is a closing meeting where recommendations are made and the findings afterwards taken to the Walmart Ethical Sourcing Assessment Team for rating. Only a green or yellow rating is acceptable (Wisner & Leong 2011). A green rating implies either no or minimal violation, and the factory has to be re-audited within 2 years. Yellow on its part implies medium-risk violation, requiring a re-audit within a year (Roberts & Berg 2012). The firm has a firm commitment to transparency within its supply chain and ensures that stakeholders are helped in the improvement of worker standards (Wal-Mart Stores 2013). The audits are performed by third party firms, which have to be internationally accredited and recognized. They also have to be registered and approved by Wal-Mart, to ensure integrity (Wisner & Leong 2011). Ideal practice requires that suppliers should be evaluated and developed. They should be informed whether they are meeting the expectations, and their progress should be evaluated in terms of sustainability as a target. Structured and clear action plans should be developed to deal with non-compliance and probation periods provided for implementation of recommendations whenever they are non-compliant. Evaluators from the local community may also be used in gathering intelligence about the conditions in supplier plants. If possible, supplier recognition and reward should be done for compliance (Skjott-Larsen & Schary 2007). Companies can talk about having ethics as a large part of their supply chains at the global level. However, if they do not carry out independent auditing and monitoring of their suppliers, it will not be easy to change much. In order to keep the promises in relation to ethics, companies will have to conduct an effective monitoring of their performance. However, according to Branch (2008), some companies rely on the self audit of the suppliers themselves. Even if a firm claims to pursue sustainability but does not audit its suppliers, then the claim cannot be backed up. Proper auditing raises the degree of transparency and helps in the identification of problems which may require remedy. Although the cost of this may be high in the short term, its long-term benefits if well designed will be greater. Flynn et al. (2011) further suggest that to increase efficiency and avoidance of audit fatigue, it may be necessary to find an already existing standard for the company to become a part of. Interaction with suppliers should be frequent, cultural challenges and issues should be acknowledged and multiple communication channels used for instance training, printed documents and websites. In conclusion, the creation of an ethical global supply chain is difficult but possible. The best way to achieve it lies in being able to evaluate all suppliers as is the case at Wal-Mart. In order for a corporation to succeed in making its supply chain ethical, it will need to look beyond setting the most competitive price to ensuring that it purchases the safest and most compliant products that are in line with stated ethical standards. There is need therefore to look at its purchases in relation to their associated cost, and also be comfortable about the suppliers from who they buy. The business should ensure that their suppliers also possess clear ethics policies and are actually implementing them. Effective auditing is therefore the key in such a process. Bibliography Branch, A , 2008, Global Supply Chain Management and International Logistics, Routledge: London Brammer, S, Hoejmose, S and Millington, A , 2011, Managing Sustainable Global Supply Chains: Framework and Best Practices, Network for Business Sustainability: Ontario Flynn, B, Morita, M and Machuca, J , 2011, Managing Global Supply Chain Relationships: Operations, Strategies and Practices, Business Science Reference: Hershey Roberts, B and Berg, N , 2012, Wal-Mart: Key Insights and Practical Lessons from the World's Largest Retailer, Kogan Page: London Skjott-Larsen, T and Schary, P , 2007, Managing the Global Supply Chain, Copenhagen Business School Press: Copenhagen Wal-Mart Stores , 2013, Promoting Responsible Sourcing in Bangladesh, Retrieved on 5 November 2013 from Wisner, J, Tan, K and Leong, G , 2011, Principles of Supply Chain Management: a Balanced Approach, South Western Publishers: Mason Read More